Virgin Trains founder Richard Branson has defended the so-called government bailout of its East Coast franchise.
Critics, including former Labour transport secretary Lord Andrew Adonis, have condemned the government’s decision to change the model of the franchise three years before it is due to end – when the bulk of premium payments from the operator were due.
A new body, which will combine the East Coast operator and Network Rail, called the East Coast Partnership will jointly operate services and manage track operations from 2020.
In response to “a lot of heat, but not much light” in the media, Richard Branson said that while Virgin Trains East Coast did agree to pay £3.3 billion to the government over the course of the eight-year franchise, that bid was based on the promise of certain infrastructure works.
However, delays to Network Rail’s upgrade work will cost the operator hundreds of millions of pounds in lost revenue, Branson added.
Franchise joint venture partner Stagecoach, which owns 90 per cent of Virgin Trains East Coast, said it was in discussions with the Department for Transport in June over the terms of the franchise, after making an £84.1 million exceptional charge to cover the losses it expected to suffer over the next two years.
Richard Branson said: “The critics argue that Stagecoach and Virgin are somehow benefitting from this. The fact is we have both lost significant amounts of money – well over £100m in total – and have not received a penny in dividends.
“We could swallow those losses and simply walk away from the franchise as others have done before. That would be easier. But it would also be wrong. It would bring an abrupt halt to the investment and improvements which are flowing into East Coast. It would mean more disruption to passengers, communities and our people. Yes, improvements never happen as quickly as any of us would like.
“But we have a track record of achieving great success in difficult circumstances. It took years to turn the West Coast Main Line around, but we persevered and with new trains, new track and our incredible team, today millions more people want to travel on our trains than ever before and we consistently top customer satisfaction tables.”
He added: “The current system can certainly be improved, and we want to continue to work with the Government and Network Rail to bring about improvements for the benefits of our passengers. I hope and believe the East Coast Partnership is a step in that direction.”